Chart of the Day – Nasdaq Extremes Relative to the 200-Day Moving Average
Dow Goes for Eight
Equities are again showing a positive tone today with each major US index trading higher, including a 0.44% gain from the Dow as of this writing. That puts the Dow on pace for its eighth straight daily gain. Looking throughout the index’s 100+ year history, such a winning streak is not particularly uncommon, however it has been a few years since such a run has been observed. Assuming the Dow finishes the day higher, it would be the first 8-day winning streak since September 2019. While plenty of streaks ended at eight days, there has been precedence of the Dow continuing its streak for even longer. That includes a near-record streak of 12 days recently in December 2017 or the record streak of 13 days in early 1970.
In the chart below, we show the performance of the Dow over the first 8 days of each winning streak that has gone for eight or more trading days throughout the index’s history. The Dow has risen 4.2% during the current stretch, which is essentially right in line with the past couple streaks from 2018 and 2019. That is also a little below the historical average of just under 5% (median: 4.6%).
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Bespoke Baskets Update — July 2023
Bespoke’s Morning Lineup – 7/19/23 – Cracking the Code
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Quick decipherment is very important to avoid the systematic errors which invariably arise from prolonged reflection.” – Jean Francois Champollion
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
224 years ago today a group of scholars who accompanied Napolean on his invasion of Egypt discovered a large slab of rock with hieroglyphic writings and other inscriptions in ancient Greek. They had no idea what the inscriptions meant, but they figured it had some significance, so they loaded it into their wagon and took it back to Europe with them. For years after, they tried to figure out what the writings meant, but it wasn’t for another 23 years before French philologist Jean Francois Champollion was finally able to decipher the “riddle of the Sphinx” and unlock the meaning of ancient Egyptian writings.
The Rosetta Stone may have taken decades to translate so that Europe’s ‘enlightened’ could fully understand its meaning, but investors have been trying for centuries to fully understand and translate the messages of financial markets, and for all the time, talent, and treasure, that has been spent trying to separate the noise from what’s really important, most investors are nowhere closer to understanding Mr. Market’s riddle now than when they first started…and anyone who is, isn’t telling!
One riddle a lot of investors can’t figure out this summer is what’s behind the levitating market. The S&P 500 has closed at overbought levels (1+ standard deviations above its 50-day moving average) every day since Memorial Day and the Nasdaq has been overbought since Cinco de Mayo. For ‘enlightened’ investors who had it all figured out that the ‘bear market rally’ from the October lows was going to reverse itself in the wake of, among other things, the bank failures in March and the debt ceiling deal in June, it’s back to the drawing board.
Futures are modestly higher this morning, and the weaker-than-expected Building Permits and Housing Starts report didn’t do much to derail the positive tone. Both Building Permits and Housing Starts came in weaker than expected, missing estimates by 46K and 60K, respectively. Not only that but May’s big 231K beat was revised lower by 72K.
The pace of earnings has been moderate and results relative to expectations have been mixed. Three notable EPS misses this morning have come from Financials like First Horizon (FHN), Goldman Sachs (GS), and Northern Trust (NTRS).
Besides trading at short-term overbought levels since early May, the Nasdaq 100 is also trading at a pretty extreme reading relative to its longer-term 200-day moving average. As of yesterday’s close, the index traded more than 26% above that level which is the most stretched reading in this indicator since September 2020 coming out of COVID, and before that late 2009 coming out of the Financial Crisis. While they were more common prior to 2000, these kinds of extremes don’t happen too often. Try to decipher the meaning of that one.
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B.I.G. Tips – Retail Sales Miss the Mark
The Closer – Correlations Down, CPI Up North, Industrial Production, Credit Access – 7/18/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look at options pricing (page 1) before turning over to Canadian inflation data (page 2) and the latest industrial production data (page 3). Next, we review homebuilder sentiment with regards to remodeling (page 4) and the latest credit access survey from the New York Fed (page 5).
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Daily Sector Snapshot — 7/18/23
Bespoke Stock Scores — 7/18/23
Homebuilders Hopeful
Housing activity has been somewhat muted given a dearth of inventories, but the lack of available existing supply has been positive for homebuilders. The NAHB’s monthly survey of homebuilder sentiment moved higher in July for its seventh straight monthly gain. Even after the rebound, the current level of 56 represents just a 13-month high and is below the range of readings from the few years prior to the pandemic and historic readings in two years before the pandemic.
The improvement in the headline index was primarily driven by increases in present sales and traffic. Geographically, the Midwest and South saw some modest softening in sentiment whereas the West and Northeast were much more impressive. The Northeast in particular saw an 8-point jump which ranks in the top decile of all monthly moves on record and brings the index into the top quartile of historical readings.
Although homebuilder sentiment has been rebounding solidly, it pales in comparison to the strength of homebuilder stocks. Proxied by the iShares US Home Construction ETF (ITB), homebuilders have continued to set new 52-week highs on a near-daily basis. The ETF has now risen 56% over the past year and has continuously traded in overbought territory (currently extremely overbought with a price more than 2 standard deviations above its 50-DMA).
Homebuilder earnings are also on deck in the next couple of weeks. Below, we show a screenshot from the Earnings Explorer function of our Custom Portfolios. As shown, all but three S&P 1500 Homebuilders are due to report through the first week of August. Of those, a vast majority have averaged positive moves on earnings.
Have you tried Bespoke All Access yet?
Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.
Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.